Megan McArdle asks, "Do We Hate Credit Default Swaps for The Wrong Reasons?"
As Megan notes, blaming credit default swaps for all kinds of things is
quite fashionable these days, since simply uttering the term makes
commentators feel sophisticated. While this is itself a topic worthy of
discussion, the more interesting point in Megan's article concerns how credit defaults swaps affect the incentives of bondholders in the context of restructurings.

The basic argument is as follows: Suppose that ABC Co. is on the
verge of bankruptcy, but wants to avoid bankruptcy by restructuring its
debt (renegotiating interest rates, maturity, etc.) with its
bondholders. Further, assume that bondholder B has fully hedged his ABC
bonds using CDS, or over-hedged to the point where B would profit from
ABC's bankruptcy. The problem seems obvious: B either doesn't care if
ABC does or actually wants ABC to file for bankruptcy, and so he will
do anything he can to stop ABC from restructuring and force ABC into
ruin.

At first blush, this looks like a serious loophole and a nice way to
make some fast cash. Sadly, there are several reasons why this is not
the case. The key factor to understanding why we shouldn't expect this
to be a major problem is to appreciate that there is no CDS vending
machine. You cannot go to the market and demand credit protection on
all of your bonds at your whim. You have to find someone willing to
take the exact opposite position that you are taking. That is, if you
bet heads they bet tails, by definition. As a result, if everyone knows
the next toss is coming up heads, you probably won't find someone to
take the opposite side of that bet.

As discussed above, when you buy protection, you (the protection
buyer) buy it from someone else (the protection seller) who will end up
paying out if a bankruptcy does indeed occur. These protection sellers
are very interested in making money, and so, as the probability of
default increases, the price of protection or "spread" widens, making
it more expensive to purchase protection. So, as firms get closer to a
restructuring or bankruptcy, the cost of buying CDS protection on
soon-to-be-junk bonds skyrockets. And not only does the cost of
protection go up, liquidity, or your ability to enter into CDS trades,
on distressed entities dries up. There's a fine reason for this too. As
the probability of default edges closer to certainty, fewer people are
willing to take the other side of the trade. They're just as convinced
as you are that ABC will fail, and they'll tell you to go sell your
bridge to someone else.

This means that in order to take advantage of the
restructuring-sabotage-strategy, you have to either (i) guess which
companies are doomed for failure well in advance of any real trouble;
or (ii) wait for trouble and then lay out a ton of cash and find
someone stupid enough to take the obviously wrong side of a bet with
you. Neither scenario seems likely to occur often, since (i) requires
some fairly remarkable foresight and (ii) requires remarkably stupid
counterparties. Moreover, in the case of (i), if you're truly convinced
that ABC is headed for restructuring or bankruptcy, you can buy
protection with "Restructuring" as a credit event, which means that if
ABC does restructure, you'll get paid. So, in that case, you don't have
to sabotage anything. You can just sit back and wait for an ABC
restructuring or ABC bankruptcy, since you'll get paid in either case.

Moreover, rather than waste all that time and effort trying to
sabotage a restructuring, you can cash in before a bankruptcy ever
occurs. As the spread widens beyond the point at which you bought in,
your end of the trade is "in the money," and so it already has
intrinsic value that you can realize in a variety of ways. For example,
assume that when you bought protection on ABC, the spread was 150 bps.
When rumors abound that ABC is entering talks with its bondholders, you
can be sure that the spread will be well above 150 bps. Let's say that
the spread widened to 1000 bps. As a protection buyer, your side of the
trade has economic value that you can realize by entering into another
trade in which you sell protection to someone else. (The CDS market has
recently begun changing the way CDS spreads are paid, but we'll assume
we're operating under the old system where the protection buyer pays
the spread in quarterly installments). That is, you sell protection at
1000 bps, pay for protection at 150 bps, and keep the remaining 850 bps
for yourself. Sure, you could go for the gold and sabotage a
restructuring, but that's a lot more involved than simply entering into
an offsetting trade and pocketing the juice.

In addition to the market based reasons above, there are corporate
governance reasons why we shouldn't coddle these kinds of claims. When
a company issues bonds, it includes terms that it and its bondholders
must live up to. That is, each bondholder could be asked to swear on a
stack of bibles that, "I will not go out and buy CDS protection to the
hilt and ruin you." If a company were truly concerned about the risk of
restructuring-sabotage, it would include such terms.

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Should you drink more coffee? Should you take melatonin? Can you train yourself to need less sleep? A physician’s guide to sleep in a stressful age.

During residency, Iworked hospital shifts that could last 36 hours, without sleep, often without breaks of more than a few minutes. Even writing this now, it sounds to me like I’m bragging or laying claim to some fortitude of character. I can’t think of another type of self-injury that might be similarly lauded, except maybe binge drinking. Technically the shifts were 30 hours, the mandatory limit imposed by the Accreditation Council for Graduate Medical Education, but we stayed longer because people kept getting sick. Being a doctor is supposed to be about putting other people’s needs before your own. Our job was to power through.

The shifts usually felt shorter than they were, because they were so hectic. There was always a new patient in the emergency room who needed to be admitted, or a staff member on the eighth floor (which was full of late-stage terminally ill people) who needed me to fill out a death certificate. Sleep deprivation manifested as bouts of anger and despair mixed in with some euphoria, along with other sensations I’ve not had before or since. I remember once sitting with the family of a patient in critical condition, discussing an advance directive—the terms defining what the patient would want done were his heart to stop, which seemed likely to happen at any minute. Would he want to have chest compressions, electrical shocks, a breathing tube? In the middle of this, I had to look straight down at the chart in my lap, because I was laughing. This was the least funny scenario possible. I was experiencing a physical reaction unrelated to anything I knew to be happening in my mind. There is a type of seizure, called a gelastic seizure, during which the seizing person appears to be laughing—but I don’t think that was it. I think it was plain old delirium. It was mortifying, though no one seemed to notice.

Why the ingrained expectation that women should desire to become parents is unhealthy

In 2008, Nebraska decriminalized child abandonment. The move was part of a "safe haven" law designed to address increased rates of infanticide in the state. Like other safe-haven laws, parents in Nebraska who felt unprepared to care for their babies could drop them off in a designated location without fear of arrest and prosecution. But legislators made a major logistical error: They failed to implement an age limitation for dropped-off children.

Within just weeks of the law passing, parents started dropping off their kids. But here's the rub: None of them were infants. A couple of months in, 36 children had been left in state hospitals and police stations. Twenty-two of the children were over 13 years old. A 51-year-old grandmother dropped off a 12-year-old boy. One father dropped off his entire family -- nine children from ages one to 17. Others drove from neighboring states to drop off their children once they heard that they could abandon them without repercussion.

His paranoid style paved the road for Trumpism. Now he fears what’s been unleashed.

Glenn Beck looks like the dad in a Disney movie. He’s earnest, geeky, pink, and slightly bulbous. His idea of salty language is bullcrap.

The atmosphere at Beck’s Mercury Studios, outside Dallas, is similarly soothing, provided you ignore the references to genocide and civilizational collapse. In October, when most commentators considered a Donald Trump presidency a remote possibility, I followed audience members onto the set of The Glenn Beck Program, which airs on Beck’s website, theblaze.com. On the way, we passed through a life-size replica of the Oval Office as it might look if inhabited by a President Beck, complete with a portrait of Ronald Reagan and a large Norman Rockwell print of a Boy Scout.

Since the end of World War II, the most crucial underpinning of freedom in the world has been the vigor of the advanced liberal democracies and the alliances that bound them together. Through the Cold War, the key multilateral anchors were NATO, the expanding European Union, and the U.S.-Japan security alliance. With the end of the Cold War and the expansion of NATO and the EU to virtually all of Central and Eastern Europe, liberal democracy seemed ascendant and secure as never before in history.

Under the shrewd and relentless assault of a resurgent Russian authoritarian state, all of this has come under strain with a speed and scope that few in the West have fully comprehended, and that puts the future of liberal democracy in the world squarely where Vladimir Putin wants it: in doubt and on the defensive.

The same part of the brain that allows us to step into the shoes of others also helps us restrain ourselves.

You’ve likely seen the video before: a stream of kids, confronted with a single, alluring marshmallow. If they can resist eating it for 15 minutes, they’ll get two. Some do. Others cave almost immediately.

This “Marshmallow Test,” first conducted in the 1960s, perfectly illustrates the ongoing war between impulsivity and self-control. The kids have to tamp down their immediate desires and focus on long-term goals—an ability that correlates with their later health, wealth, and academic success, and that is supposedly controlled by the front part of the brain. But a new study by Alexander Soutschek at the University of Zurich suggests that self-control is also influenced by another brain region—and one that casts this ability in a different light.

Modern slot machines develop an unbreakable hold on many players—some of whom wind up losing their jobs, their families, and even, as in the case of Scott Stevens, their lives.

On the morning of Monday, August 13, 2012, Scott Stevens loaded a brown hunting bag into his Jeep Grand Cherokee, then went to the master bedroom, where he hugged Stacy, his wife of 23 years. “I love you,” he told her.

Stacy thought that her husband was off to a job interview followed by an appointment with his therapist. Instead, he drove the 22 miles from their home in Steubenville, Ohio, to the Mountaineer Casino, just outside New Cumberland, West Virginia. He used the casino ATM to check his bank-account balance: $13,400. He walked across the casino floor to his favorite slot machine in the high-limit area: Triple Stars, a three-reel game that cost $10 a spin. Maybe this time it would pay out enough to save him.

“Well, you’re just special. You’re American,” remarked my colleague, smirking from across the coffee table. My other Finnish coworkers, from the school in Helsinki where I teach, nodded in agreement. They had just finished critiquing one of my habits, and they could see that I was on the defensive.

I threw my hands up and snapped, “You’re accusing me of being too friendly? Is that really such a bad thing?”

“Well, when I greet a colleague, I keep track,” she retorted, “so I don’t greet them again during the day!” Another chimed in, “That’s the same for me, too!”

Unbelievable, I thought. According to them, I’m too generous with my hellos.

When I told them I would do my best to greet them just once every day, they told me not to change my ways. They said they understood me. But the thing is, now that I’ve viewed myself from their perspective, I’m not sure I want to remain the same. Change isn’t a bad thing. And since moving to Finland two years ago, I’ve kicked a few bad American habits.

A professor of cognitive science argues that the world is nothing like the one we experience through our senses.

As we go about our daily lives, we tend to assume that our perceptions—sights, sounds, textures, tastes—are an accurate portrayal of the real world. Sure, when we stop and think about it—or when we find ourselves fooled by a perceptual illusion—we realize with a jolt that what we perceive is never the world directly, but rather our brain’s best guess at what that world is like, a kind of internal simulation of an external reality. Still, we bank on the fact that our simulation is a reasonably decent one. If it wasn’t, wouldn’t evolution have weeded us out by now? The true reality might be forever beyond our reach, but surely our senses give us at least an inkling of what it’s really like.

A report will be shared with lawmakers before Trump’s inauguration, a top advisor said Friday.

Updated at 2:20 p.m.

President Obama asked intelligence officials to perform a “full review” of election-related hacking this week, and plans will share a report of its findings with lawmakers before he leaves office on January 20, 2017.

Deputy White House Press Secretary Eric Schultz said Friday that the investigation will reach all the way back to 2008, and will examine patterns of “malicious cyber-activity timed to election cycles.” He emphasized that the White House is not questioning the results of the November election.

Asked whether a sweeping investigation could be completed in the time left in Obama’s final term—just six weeks—Schultz replied that intelligence agencies will work quickly, because the preparing the report is “a major priority for the president of the United States.”

Democrats who have struggled for years to sell the public on the Affordable Care Act are now confronting a far more urgent task: mobilizing a political coalition to save it.

Even as the party reels from last month’s election defeat, members of Congress, operatives, and liberal allies have turned to plotting a campaign against repealing the law that, they hope, will rival the Tea Party uprising of 2009 that nearly scuttled its passage in the first place. A group of progressive advocacy groups will announce on Friday a coordinated effort to protect the beneficiaries of the Affordable Care Act and stop Republicans from repealing the law without first identifying a plan to replace it.

They don’t have much time to fight back. Republicans on Capitol Hill plan to set repeal of Obamacare in motion as soon as the new Congress opens in January, and both the House and Senate could vote to wind down the law immediately after President-elect Donald Trump takes the oath of office on the 20th.